2024 (1) TMI 1280 - AT - Central Excise

Ascertainment by resorting to best judgment - clearances made prior to issue of notification 13/2008-CE(NT) dated 1-3-2008 - absence of rules for ascertainment of Retail Sales Price (RSP) having been notified by the Central Government as required under sub-section (4) of section 4A of the Central Excise Act, 1944 or not - evasion of duty - mis-declaration of RSP - RSP of tiles cleared by the appellant during the period 01.08.2004 to 29.02.2008 is to be ascertained by applying the weighted RSP of such tiles cleared during the period 01.04.2008 to 31.03.2009 or not - divergent opinions expressed by two Division Benches of the Tribunal. Whether it is permissible to ascertain RSP under section 4A in respect of clearances made between 14.05.2003 and 01.03.2008 i.e. between the substitution of sub-section (4) of section 4A and the coming into force of the 2008 Rules? - HELD THAT - Section 4A was first introduced in 1997. At that time it only provided that the Central Government may, by notification in the official gazette, specify any goods, in relation to which it is required, under the provisions of the 1976 Act, to declare on the package thereof the RSP of such goods, to which the provisions of sub-section (2) shall apply. Section 4A, as it then stood, did not provide for the effect of non-declaration of RSP on the package or wrongful declaration of the RSP or alteration or obliteration of the RSP on the package. The legislature did add sub-section (4) to section 4A in 1999, but this was restricted to confiscation of goods where RSP was not declared on the package or RSP did not constitute the sole consideration for such sale or it was tampered with or altered after removal. The amendment, therefore, did not provide for raising of any demand or ascertainment of the actual RSP in such cases - use of the word shall for ascertaining the RSP in the prescribed manner in sub-section (4) of section 4 leaves no manner of doubt that this can only be done in the manner prescribed. The word shall also conclusively establishes that it cannot be done in any other manner. Secondly, it also provides that such price shall be deemed to be the retail sale price for the purpose of this section . The sub-section hence, contemplates a deemed retail sale price , which when ascertained in the manner prescribed, shall constitute the RSP for the purposes of this section . When the intent is to create a deemed value , then the same can only be done in the manner provided by law i.e. in the prescribed manner . It, therefore, follows that it would be impermissible for any adjudicating authority to ascertain the RSP by any other methodology, for such an ascertainment would not only be contrary to the statutory prescription contained in sub-section (4) of section 4A, but would also amount to substituting the words in the prescribed manner and would have the effect of empowering an adjudicating authority to determine for itself the manner of ascertaining the RSP. The judgment of the Supreme Court in MUNICIPAL CORPORATION OF GREATER MUMBAI ORS. VERSUS PROPERTY OWNERS ASSOCIATION ORS. 2022 (11) TMI 1477 - SUPREME COURT needs to be referred to in support of the aforesaid view. The Mumbai Municipal Corporation Act 1888 was amended in 2009. The amended section 140A permitted the Corporation to levy property tax on the basis of capital value of the building. Section 154 (1-A) specifically provided that the capital value of the building shall be fixed by the Commissioner in the manner provided therein. However, clause (e) of section 154 (1-A) provided that such other factors as may be specified under sub-section (1-B) should also be considered. Sub-section (1-B) of section 154 (1-A) enabled the Commissioner, with the approval of Standing Committee, to frame rules. The rules were framed late, as in the present case, and a similar argument was raised that since the section enables assessment of property tax on the basis of capital value, it did not matter whether the rules existed or not, more particularly in view of the provisions of section 154(1-A). The Supreme Court rejected this submission and held that as the rules came into force on 20.03.2012, the levy and computation of property tax on capital value will be available on 20.03.2012 and not with any retrospective operation. The decision of the Constitution Bench of the Supreme Court in Mohammad Hussain Gulam Mohammad 1961 (5) TMI 59 - SUPREME COURT , therefore, needs to be considered. Section 11 of the Bombay Agriculture Produce Markets Act 1939 gives power to the Market Committee, subject to the provisions of the rules and subject to such maxima as may be prescribed, to levy fees on the agriculture produce bought and sold by licensee in the market area. The Supreme Court, after noticing that the State Government had not fixed any maxima, held that it would not be permissible for the Market Committee to fix any fees under section 11. In the present case, sub-section (4) of section 4A of the Central Excise Act, as substituted on 14.05.2003, specifically provides that the RSP shall be ascertained in the prescribed manner, which means that rules have to be framed under section 37 of the Central Excise Act. The RSP, therefore, can be determined only in the prescribed manner i.e. in accordance with the procedure prescribed in the rules and by no other manner. As noticed above, the rules were ultimately framed on 01.03.2008. Thus, w.e.f. 01.03.2008 RSP could be ascertained in accordance with the 2008 Rules. The issue that has been referred to the Larger Bench is whether the 2008 Rules could made applicable prior to the coming into force of the 2008 Rules on 01.03.2008. The contention of the learned special counsel for the department is that rules are merely procedural in nature and, therefore, can be applied retrospectively with effect from the date sub-section (4) of section 4A was substituted on 14.05.2003. This aspect, therefore, needs to be examined. Whether the 2008 Rules are procedural in nature or not assumes importance for the reason that it is only if they are procedural in nature that it can it be contended by the department that the 2008 Rules would apply retrospectively to all proceedings even before the 2008 Rules came into force w.e.f. 01.03.2008? - HELD THAT - The 2008 Rules are not procedural in nature. In this view of the matter it is not necessary to examine the contention of the learned special counsel appearing for the department that statutes dealing with merely matters of procedure are presumed to be retrospective, unless such a construction is textually inadmissible, as noted by Justice G.P. Singh in Principles of Statutory Interpretation . Thus, the 2008 Rules are not procedural in nature and cannot, therefore, be given any retrospective effect. Whether the 2008 Rules would apply retrospectively can also be examined from another aspect, namely as to whether sub-section (4) of section 4A, which was substituted on 14.05.2003, enables the Central Government to prescribe the 2008 Rules retrospectively? - HELD THAT - This issue was examined by the Supreme Court in G.S. Chatha Rice Mills 2020 (9) TMI 903 - SUPREME COURT . Section 8-A of the Customs Tariff Act enables the Central Government to increase the rate of duty on an article in the First Schedule in emergent situations. The Supreme Court noticed that the entrustment of this power is not accompanied by a power to exercise it with retrospective effect and so any enhancement of the rate of duty pursuant to the exercise of power under section 8-A can only be prospective. Thus, in the absence of any power conferred by sub-section (4) of section 4A to frame rules with retrospective effect, the 2008 Rules cannot be given retrospective effect, more particularly when the rules also do not provide that they will apply retrospectively. Contrary Views - HELD THAT - In M/S ACME CERAMICS AND OTHERS VERSUS CCE RAJKOT 2014 (3) TMI 164 - CESTAT AHMEDABAD , the Division Bench held that for the period prior to 01.03.2008, the entire exercise undertaken by the Revenue in determining the RSP, even if RSP is not in accordance with the law, is faulty as the prescribed manner of determination of RSP was brought into statute only from 01.03.2008. The Division Bench further observed that since the Central Government had not framed the rules for determining the RSP in a case where the RSP declared on the package was sought to be rejected, the authorities had no power to determine the RSP - However, in Schneider Electrical the two learned members of the Division Bench hearing the appeal expressed contrary views as a result of which the issue was referred to a learned third member. The learned member (judicial) constituting the Division Bench held that the demands for the period prior to 01.03.2008 would not be sustainable as there was no provision to determine the RSP. The learned member (technical), however, observed that during the period from 14.05.2003 to 01.03.2008 there was no bar in adopting a reasonable/best judgment method to make section 4A operational and that the 2008 Rules merely provided guidelines to the assessing officers. In the present case, the words used in sub-section (4) of section 4A are as may be prescribed and not subject to the rules. The decision of the Supreme Court in Sharvan Kumar 1994 (9) TMI 2 - SUPREME COURT would not be applicable and what would be relevant in the present case in the decision of the Supreme Court in Consumer Online Foundation 2011 (4) TMI 1275 - SUPREME COURT . It is also not possible to accept the contention advanced by the learned special counsel for the department that sub-section (4) of section 4A would become redundant or otiose if what is contended by the department is not accepted. Even for the period prior to 01.03.2008, sub-section (4) of section 4A would not become redundant in connection with an assessee who either failed to declare the RSP or mis-declared the RSP. The department could absolutely confiscate the offending goods - It is, therefore, not possible to accept the contention of the learned special counsel nor is it possible to accept the view taken by the learned third member in Schneider Electrical that absurd consequences would flow if the 2008 Rules are not applied retrospectively or that the executive would be left powerless. The distinction sought to be drawn by the learned special counsel between the two expressions, namely, ascertainment and determination , while advancing the contention that mere ascertainment does not confer any vested right upon a manufacturer who violates sub-section (4) of section 4A, is purely artificial and cannot be accepted. The two expressions, namely, ascertainment and determination have been used interchangeably in and, therefore, there is no real distinction contemplated while using these two expressions in section 4A. While sub-section (4) states ascertainment , the title of the 2008 Rules itself states determination . Similarly, while rule 4 uses the term ascertainment , rule 3 uses the term determination . The reference made by the Division Bench to the Larger Bench of the Tribunal is, accordingly, answered in the following manner (i) It is not permissible to ascertain the retail sale price of goods removed from the place of manufacture, without declaring the retail sale price of such goods on the packages or declaring a retail sale price which is not the retail sale price or tampering with, obliterating or altering the retail sale price declared on the package of such goods after their removal from the place of manufacture, in respect of clearances made prior to 01.03.2008, on which date the Central Excise (Determination of Retail Sale Price of Excisable Goods) Rules, 2008 came into force; (ii) In view of the answer to the first question, there is no necessity of answering the second question; and (iii) It is not necessary to answer the third question as both learned counsel for the appellant and the learned special counsel appearing for the department have stated that this question may not be answered by the Larger Bench. The papers may now be placed before the Division Bench of the Tribunal for deciding the appeal.

Summary

Issues Involved:
1. Permissibility of ascertaining Retail Sale Price (RSP) for assessments under Section 4A of the Central Excise Act, 1944, for clearances made prior to the notification of the 2008 Rules.
2. Methodology for ascertaining RSP using the best judgment method.
3. Liability of duty if RSP is manipulated fraudulently.

Summary:

First Issue: Permissibility of Ascertaining RSP Prior to 2008 Rules
A Division Bench referred the issue to the Larger Bench due to conflicting decisions in Acme Ceramics and Schneider Electrical. The Tribunal examined the history of Section 4A, noting that prior to the 2008 Rules, the Central Excise Act did not provide a method for ascertaining RSP. The Tribunal concluded that sub-section (4) of Section 4A mandates that RSP must be ascertained in the prescribed manner, which is defined by rules made under the Act. Since the 2008 Rules were notified on 01.03.2008, RSP can only be ascertained from that date. The Tribunal held that any duty collected not in accordance with the prescribed manner would be without authority of law. The Tribunal also noted that the 2008 Rules are not procedural in nature and cannot be applied retrospectively. Consequently, it is impermissible to ascertain RSP for clearances made prior to 01.03.2008.

Second Issue: Methodology for Ascertaining RSP Using Best Judgment Method
The Tribunal observed that the second issue is incidental to the first and would require an answer only if the first issue is answered in the affirmative. Since the first issue was answered in the negative, there was no necessity to address the second issue.

Third Issue: Liability of Duty if RSP is Manipulated Fraudulently
Both the appellant's counsel and the department's special counsel agreed that the third issue does not arise for consideration and should not be answered by the Larger Bench.

Conclusion:
1. It is not permissible to ascertain RSP for clearances made prior to 01.03.2008, as the 2008 Rules came into force on that date.
2. There is no necessity to answer the second question regarding the best judgment method.
3. The third question regarding fraudulent manipulation of RSP is not addressed as it is not relevant to the case.

The papers are to be placed before the Division Bench of the Tribunal for deciding the appeal.